1 The Apprenticeship Levy Study: Public Sector February 2017 Research conducted by trendence UK
2 3 Contents Introduction Introduction 3 Report context and overview 4 Employer profile 6 How will the public sector use the levy? 8 Will graduate recruitment decrease? 10 Is there any sign of a shift to high-level apprenticeships? 12 Who will have responsibility for apprenticeships? 14 On what terms will apprentices be employed? 18 How is the sector dealing with the apprenticeship brand? 20 When it comes to the Apprenticeship Levy, public sector employers operate under unique constraints. It is after all a government initiative and the organisations they work for are funded directly by government, and the government has determined that 2.3% of its workforce at local and national level should start an apprenticeship programme each year. Moreover, this government and its predecessor put severe limitations on public sector recruitment. These at times conflicting constraints have consequences for the sector s apprenticeship programmes. On the one hand there is the urgency of fulfilling the government s 2.3% target, which equates to 200,000 employees by 2020, as well as unprecedented access to funds for training that may not have been available in the past. On the other hand, there is the imperative to limit and even reduce headcount, which means public sector employers have fewer options when it comes to spending the levy than employers in other sectors. Inevitably, this means that the vast majority of employers will have to look to existing staff to fulfil the government s quota, and correspondingly fewer will be in a position to launch large-scale initiatives aimed at new recruits. The terms on which apprentices will be employed, too, will necessarily reflect the demands and priorities of government. There are other factors to take into consideration: many employees in the public sector are in older demographics, so it s not surprising that our survey finds many employers are interested in apprenticeship programmes for this age group. Part-time working is not uncommon, which will have consequences for the time available for training. Nevertheless, it s also clear from our survey that public sector employers are enthusiastic for the Apprenticeship Levy and the opportunities it offers. The levy will allow them to configure training strategically and on a far bigger scale than they could previously. They can plan for the long-term and offer high level apprenticeships in particular in ways they could not before. The diverse nature of the public sector workforce presents some unique challenges and not all training providers will be able manage them. BPP has been working with employers for 40 years. We have in-depth knowledge of apprenticeships at all levels from Foundation to Degree and Masters and across all disciplines HR, IT, finance, administration, legal and many more. Moreover, we are experienced in designing bespoke programmes that are flexible and meet the learning requirements of the apprentice, regardless of age. Whatever the needs of the public sector employer, I am confident we can meet them. Ben Lambert Strategic Talent and Development Consultant BPP Professional Education
4 5 Report context and overview Earlier this month we published a survey of 100 top employers and asked them how they aimed to deal with the Apprenticeship Levy. Were they going to use the levy or lose it, for instance, how did they think it would affect their talent pipeline, what were their recruitment strategies? Their responses were illuminating. Since then, we have been asked by recruiters to provide a breakdown of responses by sector. This survey is an analysis of the public sector s approach to the levy. It does not claim to be a weighted survey of the entire sector. But it is a snapshot of how some of the biggest employers are tackling the opportunities and challenges prompted by its introduction. The findings highlight how public sector employers, at central and local government level, plan to handle the levy and implement apprenticeships. It also contrasts how the sector s response varies in some respects from employers elsewhere. For instance: A ll public sector employers plan to use the Apprenticeship Levy to train existing staff, the highest proportion in any sector A quarter are facing an annual levy in excess of 8 million S even in ten will use the levy to train the 50+ age group, the highest number of any employer D iversity and social mobility are important objectives for many employers The levy will allow many public sector employers to expand their programmes significantly to include high level apprenticeships M ost employers are enthusiastic about the apprenticeship brand and eager to promote it Public sector employers operate under different constraints to those in the private sector. They have to meet the government s target of converting 2.3% of the workforce to apprenticeships and their headcount has been curtailed. These twin constraints inevitably colour their approach to apprenticeships, which in any case is bound to change once the levy matures and the full implications for their organisations become clearer. However, we hope that the findings in this survey will provide an insight into what the sector is thinking now, how it hopes to overcome any challenges and how it plans to maximise any opportunities. Methodology Levy Key Facts Research: conducted by trendence UK The levy starts on 6 April 2017 Sample: 100 top employers Employers will pay 0.5% of their wage bill (above 3 million) (from the Guardian UK 300) Sectors: 12 Method: online questionnaire Period: December 2016 to January 2017 Authors: David Palmer and Andreea Galin (trendence UK) and Emma O Dell (BPP) towards the levy Public sector employers must enrol a minimum of 2.3% of their staff on apprenticeships They have 24 months in which to reclaim it on approved apprenticeships Apprenticeships must last for at least 12 months All apprentices must receive 2 off the job training The training must be new and relevant to the job
6 7 Not all employers paying the levy plan to reclaim the tax through the deployment of apprenticeships. Will you use at least some of it or lose it? Employer profile Lose it 13% The majority of public sector employers (88%) are planning to use the levy but the proportion saying they won t use it is the largest in all sectors bar retail. All employers who won t use the levy say it is because they have no appropriate positions for apprentices. Well over three-fifths of public sector employers (63%) will pay an annual levy of over 1million, which is close to the all-sector average (64%). A quarter of employers (25%) are facing a levy of more than 8 million, with the same proportion paying between 500,000 and 1 million. When asked personally if they were in favour of the levy more than three-fifths of recruiters (63%) professed no opinion, the highest percentage in any sector. A quarter said they were (25%) and a few were not (13%). In our general survey, 43% of recruiters were in favour, 29% were against and 28% had on opinion. Analysis: Public sector employers find themselves in a slightly different environment to their private sector peers. The push to expand apprenticeships is a government policy, which they are responsible for implementing, and ministers have set them a target of ensuring that at least 2.3% of their workforce must be on apprenticeships, which corresponds to a figure of 200,000 apprentices by 2020. It isn t yet clear, however, what penalties employers would face if they do not reach the target. Use it 87% Approximately how much will the Apprenticeship Levy cost your company? 8million+ 5-8million 3-5million 1-3million 25% 38% 500k- 1 million 25% 250k- 500k Less than 250k 13% Are you personally in favour of the levy? Yes 25% No opinion 63% No 12%
8 9 How will employers use the levy? Year-on-year predicted levy usage 75%-10 5 All recruiters in the public sector (10) see the levy as an opportunity to earmark funds to train existing staff and only half (5) cited bringing in new talent. The percentages in the general survey were 75% and 74% respectively. All public sector employers (10) cited maximising L&D spend and supporting workforce planning as important reasons for capitalising on the levy the highest across all-sectors. However, social mobility and CSR objectives were mentioned as key objectives for a third (33%). Well over half of public sector employers are targeting 16-18 and 19-25 year olds (57% for each group), slightly above the all-sector averages (47% and 55% respectively). But an even larger proportion (71%) are aiming for apprentices in the 50+ age group, almost double the all-sector average of 37%. Only half of employers in the public sector (5) are planning to recoup most of the levy within four years compared to three-fifths (6) of all employers. A third (33%) think they will manage to use most of it in the allotted 24 months, which is near the all-sector average (32%). Analysis: Employers in the public sector are operating under two conflicting constraints: on the one hand they have a government target to convert 2.3% of their workforce to apprenticeships, on the other they are in most cases unable to increase headcount, indeed many have had to cut the number of staff. That inevitably means they will look to enlist a lot of existing staff on apprenticeships, and as many of them are older, it s not surprising that seven in ten are looking at programmes for the 50s. Year 1 Diversity initiative CSR initiative - support local communities/supply chain partners to develop talent 33% 33% Year 2 Year 3 Year 4 Reasons to capitalise on the levy? 17% 33% Professionalising and training existing workforce Maximising L&D spend Support workforce planning 10 10 10 Talent development initiative 5 Lateral recruitment initiative 17% Social mobility initiative 33% Government youth unemployment initiative 17%
10 11 Will graduate recruitment decrease? Half of public sector employers (5) say they are planning to cut the number of graduates as a result of apprenticeships but they are only planning slight reductions. Although no employer is planning drastic cuts, none is ruling out any change either. Half (5) have yet to decide on a strategy. Two-fifths of employers (4) say they will convert graduate into apprenticeship programmes. Three-fifths (6) say they will do the same for sponsored degrees, the highest proportion in any sector. Analysis: To meet the government s target, public sector employers will have to be flexible, which means they will have to evaluate all existing programmes, including graduate-level ones, to see if they can convert them into apprenticeships. One possible obstacle could be the number of part-time roles, which are common in the public sector but which could put time constraints on programmes. Will you convert any of your current talent programme to apprenticeships? Are you planning to reduce the number of graduates you recruit? Not sure 5 Yes, drastically School leaver programme 6 Sponsored degree programme No Yes, slightly 5 Work experience programme Graduate programme 4 Management and Leadership programme 4 No 2
12 13 Disciplines Is there any sign of a shift to high-level apprenticeships? Actuarial Accounting and Tax 71% Financial Services 29% Management and Business 86% Digital and Technology HR 71% 71% Legal Engineering Public sector employers are planning to offer a wide range of apprenticeships. A large majority (86%) is planning to offer high level 5, 6 and 7 apprenticeships that do not involve a degree and many will offer Degree Apprenticeships, too (71%). Most, however, are also planning to offer Foundation Level 2 apprenticeships (86%) and a significant proportion will provide Traineeships (29%). Public sector employers are planning to offer most apprenticeships in management and business (86%), technology (71%), accounting (71%), HR (71%), financial services (29%), and legal (). Over a quarter of public sector employers (28%) will cap the number of programmes they offer between 1 and 6. But over two-fifths (43%) will offer seven or more, which is almost double the all-sector average (44%, 22%). Analysis: Traditionally, many public sector employers only used foundation-level apprenticeship programmes and, understandably, price was a big determining factor. Now they have levy to spend and a target to reach. So inevitably they are eager to expand programmes at all levels, and high level apprenticeships could be a big beneficiary. Do you intend to cap the number of programmes you offer? Not sure 29% 10+ programmes 29% 7-9 programmes 4-6 programmes 1-3 programmes Apprenticeship type Degree apprenticeships 71% Higher (level 5/6/7 non degree apprenticeships) 86% Advanced (level 4 apprenticeships) 86% Intermediate (level 3 apprenticeships) 71% Foundation (level 2 apprenticeships) 86% Traineeships 29%
14 15 Who will be responsible for training your new apprentices? Who will have responsibility for apprenticeships? A training provider who can deliver all of your apprenticeship needs 29% Multiple specialist training providers 43% Appoint a lead provider with the ability to manage subcontractors Enlist the support of your organisational wide Managed Service Provider Become an employer training provider yourself Over two-fifths (43%) will opt for multiple external training providers, and 29% are looking for a single provider, both figures are close to the all-sector averages (44% and 34% respectively). A few public sector employers () are planning to train apprentices internally. Most public sector employers (71%) say an apprenticeship team will manage their programmes, one of the highest in any sector; the all-sector average is 33%. Well over half nominate L&D (57%), with saying HR and the same amount the business as a whole. Responsibility for managing apprentices Graduate /Early Career HR Of those who will opt for external training providers, the most important considerations are the ability to furnish a broad range of apprenticeships and bespoke offerings (83% each), end-to-end consultation (67%), industry experience (67%), and a strong client portfolio (33%). A third (33%) say their apprenticeship programme is driven at top executive level. Most cite L&D (67%) and a levy project team with representatives from around the business (5). Two-fifths of employers (43%) say that finance will manage the Digital Apprenticeship Service (DAS) with 29% saying it will be HR. Analysis: The diverse nature of public sector employment and the broad range of roles inevitably means responsibility for apprentices is equally diverse. However, the unique obstacles public sector employers face present a challenge to external providers, and not all will be equipped to deal flexibly and sensitively with such a diverse workforce. Talent Apprenticeship specific team The business L&D 57% 71% A majority of public sector employers (71%) will manage apprentice recruitment in house. A significant minority (29%) plans to rely on a mixture of outsourcing and in-house strategies. Who internally will be responsible for managing your online Digital Apprenticeship Service (DAS) account and resulting levy cash flow? Other 29% Business HR function 28% Finance function 43%
16 17 Services provided by a training providers How will you attract and recruit apprentices year on year? End to end consultation 67% Broad range of Apprenticeship Standards 83% Manage attraction and recruitment in house Complementary offerings (e.g. PQ/degrees) 17% 29% Use an outsourced recruitment provider Source a training provider who has a recruitment offering Ability to bespoke 83% 71% Mix National coverage (including devolved nations) 17% Variety of delivery modes Industry experience 67% Strong client portfolio 33%
18 19 What type of contract will your apprentices be offered? On what terms will apprentices be employed? Bespoke apprenticeship contract Contract for the role Permanent contract Fixed term for the duration of the programme 86% Retain existing contract (where existing staff become apprentices) 10 How are you planning to compensate apprentices? Well over two-fifths of public sector employers (43%) will pay apprentices the higher living wage and none plans to pay them the minimum wage. Most (71%) will pay apprentices a salary that reflects the programme they are in, with a significant minority (29%) paying them a wage that reflects the business line they join. The overwhelming majority of employers (86%) will put apprentices on fixed-term contracts for the duration of the programme, double the allsector average (43%), with only a few offering permanent contracts () which is half the allsector average (28%). All employers in the public sector (10) plan to retain existing staff on their existing contracts if they become apprentices. Half of employers (5) will place apprentices into direct vacancies and for over two-thirds (67%) it will be a mix of new or existing FTE. Most public sector employers (71%) will recruit apprentices through a bespoke process, well above the all-sector average (54%). Over twofifths will use lateral hires (43%) and none plans to use graduate or school-leaver assessments, which is the joint lowest along with retail. Analysis: Apprenticeship compensation and contracts in the public sector are a reflection of the headcount constraints that both local and central government have been operating under for some years. Those limitations will usually be the biggest determinants of the apprenticeship offering rather than other strategic considerations. Bonus at the end of the programme only National minimum wage Annual performance based bonus Salary increase at end of programme only Annual salary increase whilst on programme Salary reflective of business line they are... Salary reflective of level of programme Location specific salary National salary 29% 71% Going rate for the role they are carrying out Living wage 43% How will you recruit/select apprentices? Bespoke apprenticeships assessment process 71% Early Career (Graduate or School Leaver assessment process) Lateral hire assessment process 43%
20 21 Is the apprenticeship brand a problem? Do you think that the apprenticeship brand will affect your employee value proposition when using it for graduates and internal staff? Yes 57% No 43% More than half of public sector employers (57%) say the brand will affect their employee proposition with over two-fifths (43%) saying it won t. The all-sector averages are 65% and 35% respectively. Despite that, three-quarters (75%) aim to openly use the apprenticeship brand, the highest proportion in any sector and more than twice the all-sector proportion (36%). No public sector employer plans to avoid using the term, though a quarter will rename the programme internally. All of employers (10) say the prospect of improved retention and reduced attrition would be a significant ROI. Analysis: Although the public sector recognises that historically there were some negative perceptions of the apprenticeship brand, the majority of employers are very positive about the programme and eager to get behind it. The fact that apprenticeships enjoy broad political support at local and central levels of government can only help. Do you see this as a challenge at your organisation? Over two-fifths of respondents in the public sector (43%) say the requirement to provide apprentices with 2 off-the-job training is a challenge, though most are unsure (57%). All employers in the public sector (10) say staggering study time so all apprentices are not off the job at the same time would mitigate any challenge. Over two-thirds (67%) cite gaining management buy-in and the same proportion building in relevant, standardised internal training as mitigating factors. Not sure 57% Yes 43% No
BPP Professional Education is one of Europe s leading specialist providers of professional education and delivers a range of industry-leading professional qualifications, professional apprenticeships, professional development programmes and learning media. We enjoy a trusted advisor status for many of our clients and institutes and offer professionals opportunities to progress through a variety of qualifications in actuarial, accountancy and tax, banking and finance, business, law, management and leadership, HR and technology. If you have been tasked with considering your businesses strategy for apprenticeships, or advice is needed on the operationalisation of your programmes across the full apprenticeship lifecycle, then we can help. We can support you by reviewing your whole business talent strategy (graduates, apprentices and internal talent/development schemes) with a view to designing new, interconnected propositions. Contact us on: 03300 291 737 corporate@bpp.com employers.bpp.com For more information about apprenticeships, follow us on Twitter @BPPProfApps or like us on Facebook: www.facebook.com/bppprofapps For more information about trendence UK Research, contact: David Palmer, UK Research Manager trendence UK Email: David.Palmer@trendence.com Call: +44 (0)20 7061 1911 Web: www.trendence.com/en BPP University Limited 2017 BPP Professional Education Limited 2017 03651